New rules mean that you need to report and pay any Capital Gains Tax on the sale of a property

HM Revenue & Customs (HMRC) are sending out 14,000 letters to give people who have sold a residential property during the 2018/19 tax year asking them to check whether they owe Capital Gains Tax, but there could be a more immediate problem.

Anyone who has sold a property after 6 April this year where there is Capital Gains Tax (CGT) to pay, should have reported the disposal of the property and paid the CGT within 30 days of the sale. A late return will incur a late filing penalty and interest on the late payment of the CGT.

There has been little publicity concerning this new regime, and the short filing deadline is bound to catch many people out. Anyone who thinks they may owe money needs to deal with is ASAP, or face fines and interest charges later.

The letter relating to the 2018/19 tax year invites taxpayers to review their CGT position, and either amend their tax return or make a disclosure. It’s important that recipients of the letters are not alarmed and they should take care not to ignore them, and seek out immediate advice or else they could also face fines and interest charges.

It is believed that HMRC is targeting the letters at those who have sold a property which may not have been their main home. However, in the past, HMRC has sent similar ‘nudge’ letters without having undertaken any internal checks to verify the information, meaning individuals may receive a letter when there is nothing to disclose.

Be aware that the main residence relief, which exempts a capital gain on the sale of a property, only applies in full if a property has been the ‘only or main residence’ throughout your ownership.

The legislation around main residence relief can be complex if you have not lived in the property as your main residence throughout or you own more than one property. It is not always the case that main residence relief applies to the property being sold.

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